Economics students are revolting! No, not an admission from the teachers of economics that they find their students less than appealing, but a declaration of war by economics students across the globe who are fed up with the kind of economics they are taught.

Students in some of the world’s leading universities, including many UK universities, such as the London School of Economics, University College London, Cambridge, Essex, and Manchester, ­ are leading the protest, and the campaign is now going worldwide.

Movements with similar goals have sprung up in the United States, Germany, France, Brazil, Chile, India and elsewhere (though not yet in New Zealand) and have organised a global alliance, calling themselves the International Student Initiative for Pluralist Economics. Students are flocking to this banner and hits on their website are growing exponentially.

The phenomenon has begun to attract attention from the economics profession. Two leading Cambridge economists expressed support for the campaign in an article in The Guardian last week; professional economists, agreeing that economics degrees are no longer “fit for purpose” and have little to do with the real world, have joined in.

What has prompted this revolt? The student protesters have noticed an obvious fact that seems to have eluded the wider economics profession. The economics that failed to foresee, much less understand, the Global Financial Crisis and the ensuing recession – the worst since the 1930s – is still being taught in our universities; students find it hard to believe that, despite those failures, the content of their courses has not changed in any way since 2008.

They are still being taught, in other words, an economics that depends largely on hypothetical postulates, expressed usually in mathematical terms. A number of assumptions are made – that consumers and investors, for example, all have equal access to perfect information, and act in a perfectly functioning marketplace.

On this basis, deductive logic arrives at economic models which appear to have great logical validity but which – as Keynes asserted – bear little relation to reality. The goal is not to explain the real world but to provide students with an analytical toolkit that allows economics to be treated as just as much a science as, say, physics.

This deductive and highly theoretical economics has dominated economic thinking over recent decades; it is in marked contrast to a quite different tradition, dating back to Adam Smith. This earlier approach derives economic conclusions from inductive reasoning based upon observed facts and detailed data analysis.

Adam Smith exemplifies this approach in The Wealth of Nations with his explanation of specialisation; he demonstrates, from his own observations, how a few specialised workers can create thousands of pins a day when one man on his own could hardly produce one pin per day. Keynes used a similar approach in reaching his conclusion that labour markets, left to market forces, do not produce full employment.

Today’s students have begun to realise not only that the deductive approach has been shown by experience to be deficient, but that there are many different approaches to economics, many of them better able to explain the real world and to guide policy. That is why they are calling for a more pluralist and open-minded approach to economic teaching and research.

Are they right and does it matter? Yes, because the theoretical deductive economics that is being taught to the exclusion of all else takes little account of how real people behave in response to economic stimuli; and this mistaken focus continues to produce mistaken policies.

A recent example of those mistaken policies is this week’s Australian budget. The Abbott government saw the chance to convince the Australian public that the economy is in worse shape than it really is and to use that as an excuse to push through “free-market” reforms. What they describe as “structural reform” is just code for a programme of privatisation, de-regulation, asset sales, lower wages, and public spending and benefit cuts – exactly the failed nostrums that the IMF used to propagate but is now backing away from and that have done such damage to the economies unwise enough to apply them.

Tony Abbott will nevertheless fancy his chances of convincing his voters that this is the right course because he knows that most of the opinion-formers and commentators on economic matters have been brought up on the same sterile doctrines. It is that closed mind – what the French call the “pensee unique” – that explains why public opinion, despite all the evidence to the contrary, is still easily persuaded that “there is no alternative” and that the economy is best managed by those who slavishly follow the current orthodoxy.

Our own government has of course applied the same policies – though not so blatantly and with greater subterfuge – and has also exploited the voters’ gullibility to persuade them that, as the Prime Minister claims, his government is “clearing up the mess left by Labour”.

We, at least, have the advantage of some strong-minded economics teachers in our universities who are ready to buck the trend; perhaps we can now look to our economics students as well to join the campaign for more open minds?